Karvy Global  | Newsroom

AUGUST 2006

C-Chat … a conversation with Arthur R. Flew, CEO, Karvy Global Services Limited

By Paul Grim, Outsourcing venture, August, 2006

Q: What are the top things you predict will advance outsourcing during the next few years?

Flew: One important thing is demographics. Look at where there are aging populations and large numbers of people, and where work is. In the United States, for instance, our population is aging; we don't like to do some kinds of work; and we don't have enough people to do the work. In India, 51 or 52 percent of the population is under the age of 25. They need work to do. There's the dilemma. Either people will go to where the work is (in the United States, immigration laws prevent a lot of that), or work has to go to where people who will do it are located.

Another important thing is that it has come to light that there is a lot more that can be done in an offshore location than just call-center activities, simple transaction processing and software development.

Q: So BPO work is moving up the value chain.

Flew: Yes; for example, on the technology side, a lot of patents were filed out of India in 2005 — a lot more than in prior years. They're doing things like chip design and fabrication in India and other offshore locations now. On the BPO side, we're seeing complex processes and the advent of Knowledge Process Outsourcing (KPO). There is a realization that there is more capability in India, and we should utilize that intellectual pool better.

Q: How did the people in India acquire complex, high-end knowledge-based expertise for working in KPO areas such as the pharmaceutical, aerospace and biotechnology industries; analytics; legal services; market research, credit analysis and even intelligence services?

Flew: There are world-class universities in India. And a lot of people get training overseas. For example, there are 250,000 Indians now legally living in New York City. They are being trained and are working; many will go back home and contribute to the Indian growth phenomenon.

India is very advanced in certain areas, like ophthalmology. Medical tourism is booming there; surgeries are cheaper and readily available. People fly over, check into a five-star hotel, go into the hospital, have the procedure done, recover, go back to the hotel, enjoy a little tourism and then fly back to the United States or Canada.

Q: How did it come about that U.S. companies realized there is an intellectual pool in India with highly specialized skills and complex knowledge?

Flew: I first saw it in things like credit risk. A long time ago, financial institutions realized there is a lot of intellectual power and people in India with bachelor, master and doctoral degrees in finance or mathematics. So investment banking processes and other knowledge-oriented processes started being sent to India; others have followed.

Q: Some people still warn about the risks in outsourcing offshore because of confidentiality and privacy issues as well as management challenges. Is that having an effect on the growth of KPO?

Flew: It's not any more risky than at home, if you pay attention to it and manage it properly. Put it in perspective — newspapers and the media need something to talk about, and it won't be about the wonderful sunny days in India. But let's talk about quality. In technology, there is the Capability Maturity Model (CMM). I don't know the exact number, but there are slightly fewer than 60 CMM Level 5 (the highest quality) companies in the world. More than half of them are in India. The highest security standard out now — BS7799 — around things like networks, computers and access controls and processes, etc. is being turned into an ISO standard as we speak. Indian companies will focus on BS7799 and get their certification faster and in higher numbers than domestic companies.

There are around 450 outsourcing companies in India. Like anywhere else, there are bad ones and companies with only a couple of clients because the whole idea is just to flip the company; they're not investing in a long-term proposition. But there are very good companies in India that pay attention to standards and spend an incredible amount of money on training and on security.

Q: What do you advise regarding how buyers should choose a provider in India for KPO work?

Flew: In KPO, the savings are bigger than in BPO. In the United States, companies may pay $22/hour and downwards for a BPO call-center person. In India, it may be a third of that, at most. In KPO, the percentage is the same, but you're talking about a third of a $120,000 number instead of a third of $22. So it's huge. But you should not choose a provider based on that. The savings will come; it's part of the deal just because we pay less for labor in India.

Look really hard at the partner and understand what business they're in; why they're in it; how long they're going to be in it; what their mission is and their motivation. See whether they have the domain expertise you're considering. For instance, Karvy Global Services is the BPO and KPO subsidiary of the largest non-bank financial services firm in India (Karvy). Karvy is one of the top two brokers and the number-five investment bank in India. We would not be the one to come to if you want to do drug fabrication. But if you come to us for investment research, we probably do that better than most, if not all, people in India because we are a broker and do that as part of our normal operation for 20 million individual and 300+ corporate customers.

Then determine how the outsourcing company wants to work with you. Like anything else, you have to go into it wisely and carefully. These are long-term decisions. It's difficult, expensive and traumatic to change providers. Do your work up front to find the provider who is right.